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13. Adage Capital Management/ $27.7 billion

Location:

Boston, MA

Founded:

2001

2016 Hedge Fund 100 Rank:

No. 15

2016 Capital:

$27.47 billion

2015 Hedge Fund 100 Rank:

No. 10

2015 Capital:

$28.5 billion

Years on List:

Website:

www.adagecapital.com

Address:

200 Clarendon Street
52nd Floor
Boston, MA 02116

Phone:

617-867-2800

Fax:

617-867-2801

Profile & News

Firm Overview

Adage Capital Management is among the most secretive hedge fund firms in the industry, shying away from media inquiries and the public spotlight. But its success in recent years could make it hard for the firm to keep a low profile. Although the Boston-based firm endured 38 percent losses resulting from the 2008 financial crisis, Adage bounced back the following year with 41 percent gains. The firm boosted capital by 85 percent between 2011 and 2014, hitting a record high of $28.5 billion by the end of 2014.

But 2015 was a harder year for the firm, as it was for many in the industry, and Adage’s main fund lost 3.5 percent. Despite this setback, investors have consistently praised the firm’s performance.

They also praise the firm’s novel fee structure. Adage charges a 0.5 percent management fee, which is low relative to the standard 2 percent management fee that most hedge funds abide by, and only charges the standard 20 percent performance fee on gains that exceed the return of the Standard and Poor’s 500 stock index, its chosen benchmark. What’s more, the firm pays back some of those fees if its returns lag the benchmark in the subsequent year. Little wonder, then, that the firm consistently ranks at or near the top of Alpha’s annual Hedge Fund Report Card survey. Adage earned an overall A grade in 2014, 2015 and 2016, coming in at No. 3, No. 12 and No. 3 again, respectively. Investors ranked it No. 1 in 2016 for risk management, alignment of interests, infrastructure and independent oversight. In 2012, it ranked at No. 1 overall.

Co-founders Robert Atchinson and Phillip Gross have worked together since 1985 and are so-called Crimson Cubs, both having formerly served as equity analysts at Harvard Management Co., which manages the university’s endowment. As a salute to their success, Harvard University invested $1.8 billion in the launch of Adage in 2001, which accounted for a third of the firm’s initial investments. Atchinson and Gross are among several other Crimson Cubs who went on to launch big hedge funds, including Jack Meyer with Convexity Capital Management and Jonathon Jacobson with Highfields Capital Management.

Strategy

The firm’s portfolio managers conduct primary research and fundamental analysis to manage Adage Capital Partners, its long-short equity fund. The firm holds long positions using leverage and sells securities short. The fund invests in derivatives, U.S. and non-U.S. equities, and private securities. It occasionally uses risk arbitrage and other event-driven opportunities.

Funds and Fees Overview

The firm charges a management fee of 0.5 percent based on a percentage of net assets and a 20 percent performance fee based on a percentage of net profit.

A minimum initial investment in ACP is $10 million.

Clients

Investors in ACP include high-net-worth individuals, family officers, municipal plans, trusts, estates, foundations and endowments.

Regulatory Assets Under Management (RAUM)*
Discretionary	$41.97 billion (1 account)
Nondiscretionary	$0 (0 accounts)
Total	$41.97 billion (1 account)

Employees	50
Clients	1-10 total	0 percent non-U.S.
Fiscal Year Ends	December
All data as of December 31, 2016. *Regulatory Assets Under Management (RAUM) includes no deduction of offsetting liabilities, thus representing gross AUM, not net AUM. RAUM calculations include leverage, proprietary assets and uncalled capital commitments, among other items not required in the calculation of AUM.

Owners and Executives:

Name	Position	Position Held Since
Robert Atchinson	Managing Director, Limited Partner	07/2001
Phillip Gross	Managing Director, Limited Partner	07/2001
Kurt Hiler	Equity Analyst, Limited Partner	07/2001
Daniel Lehan	COO, CCO, Limited Partner	07/2001
Matthew Magee	Equity Analyst, Limited Partner	03/2004
Donald MacDougall	Equity Analyst, Limited Partner	03/2006
James Bardinelli	CFO, Limited Partner	03/2011